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The Vanishing Corporate Middle Class

Income inequality has been a hot topic of social and political discussion since the onset of the World Financial Crisis. Evidence has demonstrated that the highest earning individuals are outpacing the growth of those in other income brackets.

This trend is affecting U.S. corporations as well. Businesses are seeing a similar earnings gap as the evolving economy becomes ever more competitive. “Companies are being buffeted by rapidly evolving technology and digitization, increasing globalization, blurred industry boundaries, and regulatory shifts, among other factors. As the traditional sources of competitive advantage disappear, top-performing companies are increasing their lead on poor and average performers,” according to BCG.


Global competition and expedited growth in emerging markets are also having an impact. A little over 10 years ago, “40% of the world’s 500 biggest corporations by revenue were in North America, with the second-largest reservoir of business juggernauts just across the Atlantic in Western Europe,” Fortune reports.

The tables have certainly turned in a short ten years. Now three of the top ten largest corporations are based in China (Sinopec Group, China National Petroleum and State Grid Corp. of China), and research from McKinsey predicts, “in 2025, almost 230 Fortune Global 500 companies will be based in the emerging world’s cities, up from 24 in 2000.”


In a recent interview, Jim Smith, president and chief executive officer of Thomson Reuters, explains how corporations and its leaders should address trying to compete in the evolving economic landscape

He comments, “‘Innovation’ is one of those incredibly overused words, and it often becomes kind of a theme-of-the-day. We obviously have to talk about it inside the organization. In order for us to be successful, though, innovation can’t be a project. It can’t be a program. It can’t be this year’s thematic exercise, and all of the retreats revolve around it and the posters look nice. Innovation’s about really being focused on customers and about constantly driving toward organic growth,” according to McKinsey.